- Strong Q3 22A with record underlying EBITDA, despite unusually heavy maintenance: Strong organic sales growth of 20% y/y (actual +82% y/y &+4% q/q), supporting record quarterly EBITDA (+97% y/y & -3% q/q), with an EBITDA margin of 18.6%. Leverage at an all-time low of 0.7x net debt/EBITDA.
- North American business (Verso acquisition: USD 798mn) is contributing significantly to both earnings and cash flow: The acquisition payback period will be shorter than originally expected. Billerud North America contributed 31% to group revenue and 24% to Group, with an EBITDA margin of 13.9%. Sales volumes declined by 17% q/q.
- Paper Segment (58% of group EBITDA: Graphic Paper; Sack Paper & Kraft Specialty Paper): Sales +217% y/y & 6% q/q; EBITDA increased by 232% y/y and +2% q/q, with an EBITDA margin of 21.2% (+94bps q/q and -100bps y/y). The segment benefitted from higher sales volumes q/q as well successful price increases. Sack kraft order book is “okay and holding up, but length is reducing”. Sack kraft has significant exposure to industrial and construction, which is “no doubt cooling down” after five strong quarters. Food uses (white sack mainly) is somewhat better, but also showing some signs of cooling off. Medical uses are holding up but represent a much smaller sack kraft exposure.
- Board segment (42% of group EBITDA: liquid packaging board, containerboard & cartonboard): Sales +25% y/y & +3% q/q; EBITDA +35% y/y but declined by 9% q/, with an EBITDA margin of 20.1% (-154bps y/y & -280bps q/q). Volumes were flat y/y and down 1% q/q. Market conditions for Billerud’s containerboard and cartonboard were solid, while the conditions for liquid packaging board remained stable.
- Billerud is currently running two significant pre-feasibility studies: The transformation from graphic paper to cartonboard in the US (this will benefit SAP’s US CFS footprint) and the construction of a bleached chemi-thermomechanical pulp mill together with their JV partner Viken Skog in Norway. Both projects are running on track with potential investment decision in 2023.
- They are starting to see signs of a more gradual change towards normalized market conditions: Billerud still expects solid demand, but sentiment is changing towards being less favourable in Europe; and stability in North America. Accelerated cost inflation is expected in Europe with higher costs for wood and chemicals, while costs in North America are expected to be flat. Their order book remains healthy and prices for deliveries in the end of the year are holding up. They are starting to see signs of a more gradual change towards normalized market conditions, with signs of softening demand for some of our kraft and sack papers and some containerboard products.
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